Labour Market & Central Bank Minutes Take Centre Stage.
Summary:
UK Labour Market (Monday): Britain's employment report covering the three months to November releases at 07:00 GMT on February 17, with markets focused on wage growth data that will shape Bank of England rate expectations.
FOMC Minutes (Tuesday): The Federal Reserve publishes minutes from its January 27-28 meeting at 19:00 GMT on February 18, offering insight into policymakers' thinking on inflation persistence and the pace of future rate cuts.
UK Inflation (Tuesday): January's Consumer Price Index arrives at 07:00 GMT on February 18, expected to show whether December's 3.4% reading was temporary or signals more stubborn price pressures.
January's US employment and inflation data delivered a split verdict. Payrolls surged by 130,000 in January, nearly double the consensus forecast of 70,000 and well above December's downwardly revised 48,000. The unemployment rate ticked down to 4.3% from 4.4%, offering relief to concerns about labour market deterioration. However, annual benchmark revisions revealed 2025 job growth was slashed from 584,000 to just 181,000, highlighting the underlying weakness that defined last year.
US inflation provided clearer good news. January's Consumer Price Index rose 2.4% annually, the lowest reading since May and down from 2.7% in the previous two months. Core inflation eased to 2.5% from 2.6%, reinforcing the disinflationary trend. The Dollar strengthened after both releases, with markets recalibrating their expectations for Federal Reserve rate cuts through the remainder of 2026.
Monday morning brings the UK's turn. The ONS labour market report for the three months ending November will reveal whether wage pressures continue to complicate the Bank of England's deliberations. Average earnings for job stayers remain elevated at 4.5%, well above levels consistent with the BoE's 2% inflation target. Unemployment has climbed to 4.5%, a joint four and a half year high, while job postings sit more than 25% below pre pandemic levels. Strong wage data would reduce the likelihood of aggressive BoE rate cuts, typically supporting Sterling. Weak employment figures would pressure the currency lower.
Tuesday delivers a double header for the Pound. UK inflation data for January publishes at 07:00 GMT, with economists expecting a decline from December's 3.4% reading. The Bank of England has forecast inflation will fall sharply toward the 2% target by April or May as base effects from last year's utility price increases drop out of the annual comparison. A significant downward move would strengthen the case for March rate cuts, potentially weighing on Sterling. Conversely, persistently high inflation would support the currency by delaying further easing.
The Federal Reserve's January meeting minutes arrive Tuesday evening at 19:00 GMT. Markets will scrutinise the discussion around inflation persistence, labour market strength, and the appropriate pace of policy normalisation. The FOMC held rates steady at its January 27-28 meeting with the federal funds rate at the 3.50% to 3.75% range. Given January's strong payrolls print arrived after the meeting, the minutes will reflect a more cautious backdrop when officials were still digesting December's weak 48,000 gain. Any dovish language suggesting greater comfort with rate cuts could weaken the Dollar, while hawkish signals would support the currency.
The Eurozone operates in quieter territory this week. Final Q4 GDP data confirmed 0.3% quarterly growth, matching preliminary estimates. With limited scheduled releases, the Euro will trade primarily on spillover from US and UK events. The single currency has strengthened through January after the ECB's acknowledgment of trade policy uncertainty and Euro appreciation, but directional momentum hinges on external catalysts.
Events to Watch This Week:
Monday, February 17: UK Labour Market Report (07:00 GMT)
Tuesday, February 18: UK CPI (07:00 GMT) | FOMC Minutes (19:00 GMT)
Wednesday, February 19: US Housing Starts (13:30 GMT)
Thursday, February 20: No major scheduled releases
Friday, February 21: No major scheduled releases
If you need to discuss timing strategies for currency transactions around Monday's UK employment data or Tuesday's inflation release, contact our dealing team to review your transfer requirements.
London Office: +44 (0) 203 918 5620 | Dubai Office: +971 54 287 0072
